A “perfect storm” brewing for energy income trusts warns National Bank Financial in a new research note.

NBF reports that over the past three years, the stars have been almost perfectly aligned for energy trusts. Including unit price appreciation, NBF says the energy trust index has posted a 125% cumulative return since April 2002, compared to 51% for the REITs and 28% for the Canadian corporate bonds.

However, “Looking ahead, we see a perfect storm developing on our radar screen,” it warns. “On the interest rates front, like any other income trusts, energy trusts should be negatively affected by liquidity squeeze from the Fed. In addition, risk aversion seems to be back after U.S. carmakers downgrades (GM, Ford). More important, some energy trusts could find maintaining their distribution at current levels very challenging if oil prices (WTI) were to return under $40.”

“It is worth noting that yesterday I.E.A pointed out that Chinese oil demand growth has decelerated from 20.8% a year ago to 5.4% year to date,” it says.

“We are sticking with our underweight recommendation on [the] energy sector and income trusts put in place in early January,” it says.